Non-investment rating to Vedanta: S038;P

8220;The rating on Vedanta reflects the company8217;s exposure to commodity prices,and country and operating risks in India.

Constraints include iron ore mining restrictions,time-consuming approval processes,and changes in taxes and royalties,8221; the Samp;P statement said.

It quoted its Credit Analyst Vishal Kulkarni as saying that 8220;We affirmed the rating on Vedanta to reflect our expectation that the company8217;s oil subsidiary,Cairn India Ltd,will continue to perform strongly over the next 12 months because of favorable oil prices.8221;

Kulkarni further said that 8220;Cairn8217;s contribution should offset the likely subdued cash flow generation at Vedanta8217;s other entities due to weak metal prices and operating risks.8221;

He also said that recent restrictions on iron ore mining in Goa could have a material impact on Vedanta8217;s EBITDA unless they are removed and production resumes to their earlier levels over the next three months.

Besides,about USD 3 billion debt is maturing over the next two years,Samp;P said,adding that 8220;this will test Vedanta8217;s current ability to access the capital markets.8221;

The global rating agency further said that reorganisation of Vedanta8217;s Indian subsidiaries,expected to be completed by the year-end,will drop interest payments for the holding company to less than USD 200 million a year from more than USD 500 million at present.

The reorganisation,however,will keep the consolidated debt unchanged,Samp;P noted.

8220;The negative outlook on Vedanta reflects sizable and recurrent refinancing requirements at the holding company as well as its subsidiaries over the next two three years,8221; Kulkarni said.

He added that 8220;the negative outlook further echoes our view that the ban on iron ore mining could extend beyond the next three months.8221;